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3 Momentum Anomaly Stocks to Profit as Iran Peace Deal Spurs Market
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Key Takeaways
Sterling, Dell and Ciena passed a screen focused on strong one-year gains and short-term pullbacks.
Sterling soared 313.6% over the past year, then slipped 2.8% over the past week.
Ciena surged 528.3% in the past year, while Dell gained 259.7% over the same period.
The broader U.S. equity markets witnessed a record close yesterday as the United States and Iran reached a deal to end the nearly four-month-old war with immediate effect. The peace agreement, likely to be formally signed on Friday, set oil prices tumbling with both warring parties deciding to reopen the Strait of Hormuz in a toll-free way. The uptrend was also buoyed by a blockbuster IPO of Elon Musk’s Space Exploration Technologies Corp. under the ticker symbol of SPCX.
The spotlight is now on the Federal Reserve policy meeting as investors look for cues to gauge an idea of the future stock market direction and probable interest rate hikes. Amid the vagaries of the market, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks, like Sterling Infrastructure, Inc. (STRL - Free Report) , Dell Technologies Inc. (DELL - Free Report) and Ciena Corporation (CIEN - Free Report) when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. Therefore, this strategy is quite tricky to implement, as detecting these trends is not easy. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from long-term price momentum and a short-term pullback in price.
Screening Parameters for Momentum Anomaly Stocks
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process, as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform other stocks.
Current Price Greater Than $5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure the stability of price.
Average 20-Day Volume Greater Than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three of the six stocks that made it through this screen:
Headquartered in The Woodlands, TX, Sterling is a diversified U.S. infrastructure services company that develops and services critical infrastructure while focusing on large and complex projects. It operates across the Southern, Northeastern, Mid-Atlantic, Rocky Mountain regions and Pacific Islands.
The stock has soared 313.6% over the past year but lost 2.8% over the past week. Sterling has a Momentum Score of A.
Round Rock, TX-based Dell is a leading provider of servers, storage and PCs. It offers secure, integrated solutions that extend from the edge to the core to the cloud. Dell’s IT solutions support customers both in traditional infrastructure and multi-cloud environments.
The stock has surged 259.7% over the past year and a mere 2.1% over the past week. Dell has a Momentum Score of A.
Headquartered in Hanover, MD, Ciena is a leading provider of optical networking equipment, software and services. It develops advanced networks to support the exponential growth in bandwidth demand by harnessing its expertise in networking systems, interconnects, automation software and services.
The stock has surged 528.3% in the past year but declined 0.7% in the past week. Ciena has a Momentum Score of A.
View the Zacks #1 Rank List
Image: Bigstock
3 Momentum Anomaly Stocks to Profit as Iran Peace Deal Spurs Market
Key Takeaways
The broader U.S. equity markets witnessed a record close yesterday as the United States and Iran reached a deal to end the nearly four-month-old war with immediate effect. The peace agreement, likely to be formally signed on Friday, set oil prices tumbling with both warring parties deciding to reopen the Strait of Hormuz in a toll-free way. The uptrend was also buoyed by a blockbuster IPO of Elon Musk’s Space Exploration Technologies Corp. under the ticker symbol of SPCX.
The spotlight is now on the Federal Reserve policy meeting as investors look for cues to gauge an idea of the future stock market direction and probable interest rate hikes. Amid the vagaries of the market, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks, like Sterling Infrastructure, Inc. (STRL - Free Report) , Dell Technologies Inc. (DELL - Free Report) and Ciena Corporation (CIEN - Free Report) when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. Therefore, this strategy is quite tricky to implement, as detecting these trends is not easy. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from long-term price momentum and a short-term pullback in price.
Screening Parameters for Momentum Anomaly Stocks
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Zacks Rank #1: Stocks sporting a Zacks Rank #1 (Strong Buy) have a proven history of outperformance irrespective of the market conditions. You can see the complete list of today’s Zacks #1 Rank stocks here.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process, as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform other stocks.
Current Price Greater Than $5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure the stability of price.
Average 20-Day Volume Greater Than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three of the six stocks that made it through this screen:
Headquartered in The Woodlands, TX, Sterling is a diversified U.S. infrastructure services company that develops and services critical infrastructure while focusing on large and complex projects. It operates across the Southern, Northeastern, Mid-Atlantic, Rocky Mountain regions and Pacific Islands.
The stock has soared 313.6% over the past year but lost 2.8% over the past week. Sterling has a Momentum Score of A.
Round Rock, TX-based Dell is a leading provider of servers, storage and PCs. It offers secure, integrated solutions that extend from the edge to the core to the cloud. Dell’s IT solutions support customers both in traditional infrastructure and multi-cloud environments.
The stock has surged 259.7% over the past year and a mere 2.1% over the past week. Dell has a Momentum Score of A.
Headquartered in Hanover, MD, Ciena is a leading provider of optical networking equipment, software and services. It develops advanced networks to support the exponential growth in bandwidth demand by harnessing its expertise in networking systems, interconnects, automation software and services.
The stock has surged 528.3% in the past year but declined 0.7% in the past week. Ciena has a Momentum Score of A.